What’s the difference between you and someone wealthy right now? Leverage and about a 10 year period of asset accumulation since the last recession.
The market works in cycles and if you choose to invest now while prices are low YOU will be the wealthy one 10 years from now. Seems like a long shot? Wealthy people always plan long term.
Think like an investor and invest your money now. If there is excess money just sitting in the bank, it is dead money and not working for you, only losing value.
But why invest in Real Estate?
•LEVERAGE: You don’t even need to supply the full cost upfront. You can borrow money for the initial down payment or pay it over time with a mortgage. This works in your favour.
•A Physical Asset and a home to live in giving you SECURITY.
•EQUITY opportunities: As the value of the property increases over time you can essentially “withdraw” the extra cash or refinance the property with a second loan and reinvest it on a second property.
•Future PASSIVE INCOME: Find a tenant and rent it out for a second income.
•Stable Safe Investment with LOW RISK. This small risk can be further reduced by thoroughly researching the costs, property and area BEFORE investing.
Most important things before deciding to invest:
•Be able to Negotiate a Discount on the selling price. Say, the property requires maintenance or the selling offer is too high, you can get the price down.
•Calculate Costs in advance including refurbishment costs, expenses like annual maintenance costs and property insurance.
•Calculate potential Average Rental Income by valuation and by looking at other similar properties on the market.
•Calculate Net Operating Income (income minus total costs).
•Calculate the Return on Investment based on these numbers.
RETURN ON INVESTMENT (ROI) = Net Income/ Cost of initial investment.
•A good way to evaluate Returns are:
Wealthy money: 13-20%
Healthy money: 9-12%
Safe money: 5-8%
Dead money: 0-4%
•Note: Your Net Operating Income decides what kind of financing you can afford to pay each month.
So there it is…Seek out your own real estate investment opportunities. Check your local areas and do the maths. If it’s your first investment, you can live in it or if possible you can rent it out, and pay off your financing. Keep it simple. Keep it smart. You’ll be one step closer to that life of wealth you dream of.
These ideas can be explored further in: “The Millionaire Real Estate Investor: Gary Keller”.